Software and Services Industry

Romania as a Growing Center of Software and Services Expertise

Additional information:
Outsourcing in CEE. Romania – Country Overview (presented in CEEOA hosted webinar, February 2010)
Customer Experience in Outsourcing Provider Selection (presented in CEEOA hosted webinar, February 2010)

The IT&C sector is considered strategic for the development of the national economy, as it can drive and enhance development and competitiveness of every other industry.
Romania is one of the strongest markets in Europe for technology investment and trade, with a highly skilled technology workforce, good cost/quality balance, top-tier investors and a friendly business environment.
Being part of the fastest growing IT market in Europe, Romanian companies have managed to engage in partnerships and business relations with some of the world’s most demanding customers in IT services outsourcing, business process outsourcing, call center support and product development.
With a constant yearly growth of more than 20% over the last 5 years, on the 2nd largest market in CEE and adding upto10% of the GDP, the ITC sector in Romania has an important potential for development.
ANIS estimates show that, even with the influence of the present international context, the sector has a good opportunity of maintaining the growing trend, although not with the same high performance of the last years. The use of enhanced technology is recognized to represent a tested method for companies in all economic sectors to reducing their costs, with increasing competitiveness, at the same time.

Romania as an Offshore Destination
Romania has a strong position for attracting a significant amount of the incoming offshoring business to be located in CEE countries.
Romania is already home to a significant amount of offshore business, with many companies – small enterprises operating below-the-radar of mainstream international attention – engaged in custom application development for foreign clients. These companies have been gaining experience in the offshore business, with growing projects and extended sector expertise, and based on their development potential, will be able to serve as a reliable sourcing operation for many years to come.

Attractive Price vs. Performance Balance
Romania is not the lowest cost location for outsourcing, but when performance is added to the equation it can be highly competitive. Customer surveys show that costs and pricing only represent a fraction of the decision criteria for locating offshoring projects. Previous sector experience, technology expertise, quality of the proposal, solid procedures of financial reporting and coordination systems are some of the criteria that decide in favour of Romanian companies.

Technical and sector specific skills at best practice
Romania cannot hope to rival much larger countries such as India, China and Russia in terms of breadth of expertise across application development. Nevertheless, Romanian companies can excel in terms of new technologies and offer strong software development methodologies and processes.
Romanian IT services companies have been involved in projects on the internal market that addressed very specific vertical segments or niche technologies. Turning on the international market, these companies hope to leverage turn-key software applications and customization expertise gained in, among others, the government, utilities, education and finance sectors.

Ability to understand and satisfy client needs beyond basic technical requirements
It is a common perception that Eastern European countries, Romania included, are not able to compete with “classic” offshoring destinations in terms of number of people and costs.
However, companies with experience of outsourcing to Eastern Europe point to a number of advantages that the region offers for more complex or business-critical engagements. Surveys indicate Romanian development companies’ customers have experienced particular good understanding of their requirements and business needs beyond those set out in the RFP or project specs.

Cultural Fit, Language Skills and Similar Mentality to US/ Western Europe
Geographical proximity to Western Europe is clearly common to all developers in the CEE region, but Romania has a cost advantage compared to Central Europe while its membership of the European Union differentiates it from most of Eastern Europe, enabling Romanian-based providers to more easily visit or deploy staff to client sites both within the EU and without.
An area in which Romania is regarded as particularly strong compared with other countries in Eastern, or even Central, Europe is in the language skills of both management and technical staff. Romania boasts one of the highest rates in CEE of participation in language classes at secondary school level. Language proficiency among the adult population is similarly high. In addition to a significant proportion of the labor force having a high degree of competency in English, there is widespread knowledge of other European languages, most notably French, but also Italian and German.

ROMANIA
General Info

Area: 231,391 km2 (92,043 sq mi.) (9th in EU)
Population: 21.6 Million (7th in EU)
Member of: EU, WTO, IMF, WB, NATO
Strategic location: at the crossing of 3 pan European transport corridors, holding the Eastern border of the inland European Union and at the turning point where EU meets the Balkans and CIS countries.

General FDI Performance
In the first 10 months of 2008, the Romanian economy received a boost of investment of almost 30,000 millions EUR from +11,000 companies. The major investing countries over the last 10 years are: Austria, the Netherlands, Germany, France, Greece, Switzerland, and Italy.
Although being one of the most dynamic and with the biggest potential, along the automotive components sector, IT&C only attracted around 4% of the total volume of investments, still leaving room for further development.

Taxation Info
Corporate tax of 16% places Romania in good position among other CEE countries, which have reduced the corporate tax in order to diminish the fiscal burden. The level of VAT is 24%.

Sources:
§ IDC Whitepaper: Romania as an Offshore/ Nearshore Outsourcing Location (2007)
§ Romanian Agency for Foreign Investment – statistics and sector presentations
§ Employers’ Association of the Software and Services Industry – estimates and company interviews